Escrow & TitleIntermediateCalifornia Exam

A preliminary title report is issued by a title company PRIMARILY to:

AGuarantee that title is free and clear of all defects, as typically handled by an escrow officer

BReport the condition of title and exceptions that will appear in the title policyCorrect

CEstablish the market value of the property, consistent with standard title insurance practice

DServe as the actual title insurance policy, per customary closing procedure in California

Why Report the condition of title and exceptions that will appear in the title policy Is Correct

Answer B: Report the condition of title and exceptions that will appear in the title policy

A preliminary title report (also called a 'prelim') discloses the current state of title, including existing liens, encumbrances, easements, and other exceptions that would be excluded from coverage under the proposed title insurance policy. It is an offer to insure, not a guarantee of title itself.

Exam Tip: Escrow & Title

Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.

Key Escrow & Title Terms in This Question

Easement

A non-possessory right to use another person's land for a specific purpose.

Encumbrance

Any claim, lien, charge, or liability attached to real property that affects its value or limits its use.

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

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